Abstract

http://ssrn.com/abstract=315503
 
 

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Contracts, Externalities, and Incentives in Shopping Malls


Eric D. Gould


Hebrew University of Jerusalem - Department of Economics; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

B. Peter Pashigian (Deceased)


University of Chicago - Graduate School of Business

Canice Prendergast


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

January 2002


Abstract:     
This paper demonstrates that mall store contracts are written to internalize externalities through both an efficient allocation and pricing of space, and an efficient allocation of incentives across stores. Certain stores generate externalities by drawing customers to other stores, while many stores primarily benefit from external mall traffic. Therefore, to varying degrees, the success of each store depends upon the presence and effort of other stores, and the effort of the developer to attract customers to the mall. Using a unique data set of mall tenant contracts, we show that rental contracts are written to: (i) efficiently price the net externality of each store, and (ii) align the incentives to induce optimal effort by the developer and each mall store according to the externality of each store's effort.

Number of Pages in PDF File: 36

Keywords: Contracts, Externalities, Incentives

JEL Classification: L20, J33, R00

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Date posted: June 26, 2002  

Suggested Citation

Gould, Eric D. and Pashigian (Deceased), B. Peter and Prendergast, Canice, Contracts, Externalities, and Incentives in Shopping Malls (January 2002). Available at SSRN: http://ssrn.com/abstract=315503 or http://dx.doi.org/10.2139/ssrn.315503

Contact Information

Eric D. Gould (Contact Author)
Hebrew University of Jerusalem - Department of Economics ( email )
Mount Scopus
Jerusalem, 91905
Israel
+972 2 588 3247 (Phone)
+972 2 581 6071 (Fax)
HOME PAGE: https://sites.google.com/site/edgould
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
B. Peter Pashigian (Deceased)
University of Chicago - Graduate School of Business
N/A
Canice Prendergast
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7309 (Phone)
773-702-0458 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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References:  16
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